THE government will retain the Sales and Service Tax (SST) rather than revive the Goods and Services Tax (GST), with concerns over the financial burden on lower-income households weighing against the potential revenue benefits of a broader consumption tax.
In a written parliamentary reply, the Ministry of Finance (MOF) said the relatively low income levels of most Malaysian households meant any changes to the tax structure must be guided by the public's ability to pay.
MOF was responding to Hassan Abdul Karim (PH-Pasir Gudang), who sought clarification on proposals for a hybrid SST-GST system.
The ministry acknowledged the advantages of GST but cautioned that its regressive nature could disproportionately affect poorer households, which spend a larger share of their income on consumption.
“GST also tends to be regressive as lower-income groups spend a larger proportion of their income on consumption. Although the tax rate is the same, the relative burden can be heavier for poorer households,” it said.
It added that potential revenue gains must be assessed against the financial impact on citizens.
The ministry said the SST also offered businesses greater flexibility to absorb part of the tax burden instead of automatically passing the full cost to consumers.
It maintained that the existing framework incorporated strengths of both tax systems, helping to minimise tax cascading while balancing consumer and industry interests.
The government would instead periodically refine the SST to address the needs of different industries.
Prime Minister Datuk Seri Anwar Ibrahim had previously indicated that the government was open to incorporating selected GST elements into the SST to develop a more progressive tax system.
“We are open to studying ways to improve the tax system. But if we are talking about GST alone, my concern, as I have said repeatedly, is that it would mean taxing the people,” said Anwar, who is also Finance Minister. - November 12, 2026
